First, I should explain that I am not against the Supreme Court decision because I am some bleeding heart socialist who thinks corporations are evil. Indeed, I have started several corporations myself, have been hired as CEO and other management positions for corporations, and have also served on the Board of Directors of corporations. In addition, I strongly believe in the constitution (including the right to bear arms), so you might think I would look kindly on first amendment free speech arguments.

Arguments For

So let’s look at the arguments:

The most popular (and persuasive) argument is that corporations are made up of people, and people should be allowed to band together in order to express their views. So corporate speech is equivalent to the speech of the shareholders of the corporation, and thus should be protected. Indeed, political speech — if anything — deserves extra protection.

Another argument is that corporations are people, or at least have the same rights as people. This argument is an extension of the idea that corporations are “legal persons”, and has been developing over the last hundred years or so. Initially, corporate personhood was constructed to allow corporations to sign contracts, and allow corporations to sue and be sued. Since we all agree that corporations need to have some of the rights of real people, where do we draw the line? Don’t corporations deserve due process of law like real people? Why not free speech rights?

The first amendment clearly states “Congress shall make no law … abridging the freedom of speech, or of the press.” It doesn’t say that only real people have free speech. It protects speech, no matter where it comes from (even a corporation). “No law” means “no law”, pure and simple.

But all of these arguments are deeply flawed. The first argument assumes that all corporate shareholders are US citizens. But as Newsweek points out:

A majority of large businesses are now owned by foreign entities, and this means international corporations could pour tons of money into the United States political scene, potentially swaying the political climate.

I’m losing sleep over the millions — or billions — of dollars that could flood into our elections from ARAMCO, the Saudi Oil corporation’s U.S. unit; or from the maker of “New Order” fashions, the Chinese People’s Liberation Army. Or from Bin Laden Construction corporation. Or Bin Laden Destruction Corporation.

The Supreme Court ruling declared that corporations have free speech rights. Does this allow Congress to take away free speech rights from foreign corporations, so they are not allowed to influence elections? Otherwise, how do we deal with foreign ownership of corporations? After all, we already have (constitutional) laws that prohibit foreigners from controlling US media (although with this new ruling, they don’t need to actually own a US media company in order to use it to influence an election).

But if we do take away free speech rights from foreign corporations, consider Sony Corporation, which is a Japanese corporation but is listed on the New York Stock Exchange and has a large number of shareholders in the US. Do those US shareholders not have the same free speech rights as shareholders in US companies?

The law struck down by the court allowed corporations to influence elections by having political action committees (PACs) so that the individuals that make up a corporation could pour (tons of) money into political campaigns. But the donors to PACs had to be US citizens. Isn’t that a simple and brilliant solution to the problem of foreign ownership of corporations?

Even US corporations have many foreign shareholders. The Supreme Court ruling has no way to deal with this. Should a US corporation that has no US shareholders have the right to pour money into US elections? If so, it would be quite easy — and perfectly legal — for a foreigner to start a US corporation (and hold all the shares) and then throw money at a US election. And we couldn’t do anything about it, even if they were purposely trying to harm the US. What about a corporation that is 90% foreign owned? Or 50%? What about a corporation with a single foreign shareholder out of thousands? See the problem?

Even ignoring the problem of foreign ownership, do you really want even a US corporation like Monsanto buying politicians in order to influence agricultural law? As Justice Stevens said in his dissent:

While American democracy is imperfect, few outside the majority of this court would have thought its flaws included a dearth of corporate money in politics.

A problem with the second argument is that corporations cannot realistically have all the rights of real people. For example, they cannot run for office, or vote. Allowing a corporation to vote would give corporate shareholders extra votes (there is no legal limit to the number of corporations a single person can own — I can set one up for $50 in a few hours).

Other constitutional rights might be possible, but would be a very bad idea. For example, if corporations have the right to bear arms, does that mean that large corporations have the right to create their own armies? Could they own nuclear weapons? Some corporations have more money than many decent sized countries. Could corporations declare war (on each other, or on countries)?

The third argument is completely wrong, since we have many perfectly reasonable laws that abridge the absolute freedom of speech. The most common example is that it is illegal to yell “fire” in a crowded theater. The Supreme Court itself restricted the First Amendment rights of Hare Krisna leafleters asking for donations in airports. Many of the same conservative justices held in that case “by asking for money for leafleting—their form of speech—the Hare Krishnas were being ‘disruptive’ and posing an ‘inconvenience’ to others.” If causing inconvenience is a good enough reason to deny free speech to the Hare Krishnas, isn’t preventing the total corruption of our government a good enough reason to place reasonable limits on free speech from corporations? (Or do conservatives just believe that some organizations are more equal than others?)

Arguments Against

But none of this is why I think that the Supreme Court ruling is wrong. I believe it is wrong for two main reasons:

A corporation is a legal construct for making money. Not only is their sole purpose to make money, but in most cases they are required — by law — to make as much money as reasonably possible. Corporations have a legal fiduciary responsibility to make money for their shareholders.

Corporations themselves don’t speak or act. When an officer of a corporation speaks or acts for the corporation, their speech and actions are already controlled — by the corporation. If I am performing my duties for a corporation, I can only say and do things that will make money for the corporation. If I instead decide that it would simply be nice to distribute presents to poor children in Cuba, unless it is reasonably obvious how this will help the corporation, I will almost certainly be sued by the shareholders of the company and will definitely be fired.

The economist Milton Friedman declared that the “one and only social responsibility of business, [is] to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game …” Friedman even contrasted this with humans, who can have multiple responsibilities: “to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country.”

If corporations are persons, they are — if they behave as Milton Friedman wanted them to — persons with mental and emotional impairments so severe that any decent judge would feel entirely justified in declaring them incompetent.

Does the court really believe that it is a good idea to give incompetent psychopaths more power in our government? This problem is exacerbated by the fact that our current business environment strongly rewards short term profits over long term ones, making it hard for corporations to invest in their long-term future. Corporations often behave like alcoholics or drug addicts whose only concern is what will drive up their stock price now, and never mind about the consequences tomorrow.

The second (and more important) reason is that this decision is bad for business. Corporations will now have to compete even more against each other to influence legislation in their favor. This is bad for several reasons:

Money spent on politics may influence legislation, but other than that it doesn’t help the economy. It is effectively a tax on corporations, but without raising any money for the government. It has all the economic downsides of a tax, with none of the benefits. Republicans claim to be against taxes and accuse Democrats of wanting to tax and spend, but this is the worst of both worlds: taxing with no spending.

Corporations with more money will likely win these political competitions, and thus will make even more money (and influence even more legislation) — not because they are better, more efficient, or more innovative, but only because they have tilted the playing field in their favor. This means that some other, better, more efficient, or more innovative company will suffer. A successful free market requires a level playing field. Without actual competition, companies grow flabby and inefficient.

Larger corporations with more cash will have an unfair advantage over small businesses. But as economists like to point out, it is small businesses that create new jobs and actually drive the economy.

Giving corporations the right to pour money into elections will cause grievous harm to the economy. Even more ironically, it will make it necessary for corporations to harm themselves by wasting money and time on politics and by reducing actual, real competition that keeps companies trim and competitive.

We already have a great example of this. Most American companies (especially small companies) would be much better off if they didn’t have to pay for health insurance for their employees. Even if it was still paid by businesses, it would be better overall if the skyrocketing health care costs in the US were brought down to be more in line with other countries in the world (with no sacrifice in actual health care). However, the health insurance companies would lose lots of money, so they have been spending millions of dollars to kill health insurance reform. This not only hurts the economy as a whole, since the cost of health insurance to other businesses is high and rising rapidly, but it also harms even the health insurance industry itself, since they have to spend lots of money to kill health insurance reform. They will then have to turn around and charge higher premiums to cover the added expense of their “political free speech”. Which means that fewer companies will be able to afford health insurance for their employees. In the end, everyone loses, even those corporations fighting for the status quo.

Another example is the Wall Street bailouts. Which is better for the economy: Banks becoming more competitive, more efficient, and figuring out how to avoid making bad loans? Or banks spending their time and money to put even more bailout-ready politicians in office, who will spend our tax money to give banks that are already “too big to fail” an unfair advantage? (So why aren’t the tea partiers freaking out over this Supreme Court decision?)

[tl;dr] Bottom line? The Supreme Court decision was not about free speech: corporations are not people, and money is not speech. And with this decision, everyone loses, including government, business, and plain old people.

This was written by Iron Knee. Posted on Wednesday, January 27, 2010, at 2:37 am. Filed under Best, Irony. Tagged Corporations, Supreme Court. Bookmark the permalink. Follow comments here with the RSS feed. Both comments and trackbacks are currently closed.

23 Comments

Ace Justice wrote:

I always thought that if corporations were people then they should be in the running for the draft. Imagine how quickly corporate personhood would change if wal mart or microsoft were drafted, and what that would entail.

I’m concerned that most Americans are not considering the seriousness of this issue (yet) and, even worse, don’t care. Thank you for your insight. I’m furious over this and more concerned than ever for how America will come out of this in the future. I don’t think this was what we signed up for with ‘change.’ The stupidity of this has all the signs of this being a legacy of the ‘W’ Administration.

As you mentioned, the rich corporations will get richer as they would tilt the playing field in their favor. I am amazed why would “free market” conservatives can think this is a good idea. This clearly goes against free market. Government should stay out of market and more importantly market should stay out of government. This is just horrible..

Thank you for this post, I will pass it around. It is, quite simply, the most concise argument against the Supreme Court ruling, integrating every argument and then dissecting them all. It will be very interesting in the next few years how this plays out. There seems to be no real beneficiaries of this ruling and populist anger seems to be mounting. This may be in the realm of a constitutional amendment.

Terry, part of the reason the ACLU supported the Supreme Court ruling is that it frees them to run issues ads during an election. But I was purposely ignoring those kind of corporations. In addition to non-profits and educational organizations, co-operatives (coops like Ocean Spray, REI, Tillamook Cheese, etc.) are also a form of corporation that don’t necessarily have profit as their only goal.

I saw George Will over the weekend say that this court decision will have no ill effect over campaign financing because decades of social science suggest that legislators vote their conscience or that of the will of their constituents, and that their votes are not influenced by who is donating to their campaigns (paraphrasing, but pretty close to a quote).

Here is what one of my Libertarian friends had to say about your analysis:

“The man is an idiot. He makes many, many mistakes. First, he throws
away all of his early arguments (and a good thing, too, seeing they’re
all wrong), then presents two equally-wrong arguments. While he is
correct that corporations have no responsibility to their country, so
what? Neither does anyone else. And so what if it’s “bad for
business”? It’s not his business to run other people’s business! His
socialistic bent permeates all his arguments.

What he ignores is the real problem: Corporations were created by the
government; government made the problem possible. End corporate
personhood, and all the problems with corporations vanish. It’s
obvious the poor man never studied his constitutions (which is the
case with virtually every citizen) and slept through economics class.

Well, other than admiring your friend’s brilliant arguments (calling me names like idiot and socialist; and “studied his constitutions”? since when do we have more than one constitution?), I would just like to point out that if the real solution is to end corporate personhood, then how will corporations enter into contracts, and how would someone sue a corporation when it breaks the law? Completely ending corporate personhood would basically end corporations, since the whole purpose of a corporation is to shield the shareholders of the corporation from legal liability. Or did *he* sleep through that part of economics class?

And claiming that nobody has any responsibility to their country? I guess all those kids who got drafted during the Vietnam war were too stupid to think of that simple argument. Not the government’s business to run other people’s business? I guess we should abolish dollars and let everyone go back to bartering. And police or laws? Who needs ’em? If someone’s business is theft, it’s not my business to tell them otherwise.

Knee-jerk Libertarian ideologues are such fun. They have such simpleminded solutions to all the world’s problems.

[By the way, in case anyone thinks I am against all libertarians, let me point out that I agree with many libertarian ideas, and I even helped out on the political campaign of our Libertarian candidate for governor. My problem is with ideologues.]

I appreciate what you wrote. As someone who works for a global corporation, I agree with your point that global corporations have no allegience to the U.S., only to ‘maximizing value to the stockholder.’ As evidence, you can count all the American jobs that have been sent overseas. This is the way global corporations think. And this court decision now allows them to use their immense profits to influence the political process. How naive to think this won’t end badly.
Let’s not kid ourselves, corporations are not the voice of the people or even of the stockholders. It’s not ‘one man, one vote’. It’s ‘one share, one vote.’ The policies of a corporation are set by very few people, who now, with this court decision, can use the profits of the entire corporation to promote their self-interest.
Again, we see the consolidation of power and influence into the hands of a few.

Friedman is a harebrain in not recognizing that when one makes killing machines by ignoring social responsibilities to humanity, one gets only killing machines who do ignore it.

Hitler, himself, was the most excellent example of a killing machine without social responsibility to humanity. Hitler’s business was power; manufacture and distribution of it.
He did it very well and had no ethical dilemma about its creation.
The same would be true today without social responsibility.

Killing machines could be made in the form of biological agents, robotic agents, or methodology and mechanical agents for profit that are easily justified to accomplish the mission, the public be damned. The military is an easy example of such a corporation justifying by any means the acquisition of funds, the use of funds, and the justification of funds without morality. In war there is no morality; therefore, the military operates outside of morality in order to kill.

Companies who are not military seek the same lawless frontier of freedom to make profits: to take from, not to give to society. It can only produce a predatory society; that is not, and never has been the explanation of capitalism before Milton Friedman.

@ Iron Knee: It’s possible to have several Constitutions. For example, there is a Constitution binging my federal government, and another established by my State. It’s not inconceivable that a municipal charter would establish a local Constitution, or that a super-national body would have one.

From the article: “But all of these arguments are deeply flawed. The first argument assumes that all corporate shareholders are US citizens.”

I don’t see how citizenship (which you largely base your arguments on) is at all relevant here. Does the Constitution (the federal one, the one with the 1st Amendment in question here) mention anywhere that these rights are only the properties of citizens of the US? I’ve always thought that rights are (by right) an inborn default, that they can be trampled or stifled or ignored, but are never something that a governmental body can simply grant or not grant. Something about all men being created equal, with, if you’ll allow the expression, “god-given” rights.

And “shall make no law” takes a lot of dishonest interpretation to mean anything other than “shall make no law.”

At the end of the day, if we as a society allow our opinions and values and principles to be distorted simply by someone spending a lot of money, then I’d say we deserve what we get. That’s democracy- people thinking and acting (and being influenced) as they choose. At any rate, government is the last party that should engage in social engineering, counter- or otherwise. That is, it should never engage in social engineering, even if it is rationalized as a counter-action: attempting to affect what (otherwise) would be peoples’ opinions is still attempting to affect opinions, and opinions are not in the legitimate purview of government.

Wasn’t there a time that corporation needed a charter and those charters were approved by congress and had an actual time limit. The corporation had to be doing something that actually helped the people. Now they just run wild doing what they want.

Business historically gives to Republican causes. No one can compete with business’s ability to give. If they can give unlimited amounts they might, over a period of time, completely dominate the political scene and in the end destroy the Democrat party. Thus, without checks and balances, we would eventually become a one party country, ending our democracy as we know it. We would have destroyed ourselves from within. And, for the first time it has become a real possibility.

The author is correct! A corporation has only one legal requirement, to make profit for it’s shareholders. (period!) All the other arguments listed here are superfluous and the legal interpretations of Supreme Court rulings has only exacerbated the issue of corporate personage.

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